Selling your business is part of the succession plan. Business succession either happens while you’re alive, an asset sale, or a component of your estate plan. Both are a part of succession planning. Why would a business owner need an attorney to assist them with succession planning? First, if the business is currently operated in the form of a sole proprietorship, we might need to set up an LLC or a corporation to hold the business assets. An existing corporation could be converted into another entity to obtain certain benefits and divide up control, so we can get a stepped-up basis on the business assets upon the death or sale. There are also strategies to implement income tax reduction or pass through taxation.
These are all factors that need to be considered and why the business owner needs to consult with an attorney and a CPA. There are several income and estate tax considerations for businesses as well. An attorney who has experience doing this type of planning with business owners is required, so they can bring their skill and expertise to the table.
Do Small Business Owners Generally Put Off or Delay Business Succession Planning?
Many small business owners delay succession planning. They feel that they are the business, and in their absence, the business will cease to exist. This is especially trust for a consulting business. Many small businesses lack a key person, like a family member, to carry on the business. The children may have their own careers or are simple uninterested in the family business. The business may lack purchasers who could step in fulfill the business purpose. Without answers to these questions, the small business owner keeps working the business, like they always have, without putting together a business succession plan.
What Factors Determine the Necessity to Plan for the Succession of My Business?
Every business should have a succession plan. It is undeniable that the business owner will eventually die or lose the capacity to continue the business. There must be someone to step in, even if the business will cease operations, to wind down the business, file the tax returns, collect accounts receivable, and handle court proceedings. Unless the business is a corporation with multiple shareholders and partners to continue the business, there needs to be a succession plan.
Do All Estate Planning Attorneys Handle Business Succession Planning?
Business succession planning is a very specific area of law under the umbrella of estate planning. There are nuances to tax planning and business planning, there must be carefully navigated by an experienced attorney, who will provide effective counsel to the client, and ensure the succession plan is executed without any problems. There are many estate planning attorneys who are not equipped to handle succession planning.
For more information on Selling A Business Vs. Succession Planning, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (615) 628-7775 today.